The Economics of the Israeli-Palestinian Conflict

News of an Israeli-Palestinian cease fire reminds me of Tyler's Cowen's excellent game theoretic exploration of their long struggle. This essay is worth a thousand news stories on the subject, but I still think that Tyler misses the simplest explanation of this sad situation: out-of-sync tit-for-tat.

1. Cooperate in round one.
2. In all other rounds, cooperate if the other side cooperated last turn, otherwise don't cooperate.

This strategy is usually called tit-for-tat: You scratch my back, I scratch yours; you don't scratch my back, I don't scratch yours. What could be simpler?

The main problem with tit-for-tat arises if people disagree about who stopped cooperating first - if they are "out of sync." When this happens, two tit-for-tat players get caught in a blood feud. I attack you because you attacked me last turn; but in your mind, you attacked me because I attacked you the turn before. Remember the Grangerford-Shepherdson feud from Huckleberry Finn?

Call it simplistic, but I think this is the heart of the Israeli-Palestinian conflict. The Palestinians think the Israelis started it with the creation of Israel. The Israelis think the Palestinians started it by fighting against the creation of Israel. The Palestinians see terrorism as retaliation for past wrongs. The Israelis see occupation as retaliation for terrorism. And so on. Both sides think that they have to punish the latest action of the other side in order to deter future offenses. And if they stop retaliating, it's a virtual admission of initial guilt.

And needless to say, both sides get hysterical if you suggest that maybe it isn't all that clear who started it.

How do you get out of this trap? I don't know, but realizing that you're in the trap is the first step toward getting out.

Comments and Sharing

Give greed a chance. It all comes down to incentives. Offer financial incentives for people not to hate each other. Subsidise mixed schools and intermarriage. Pay people to end their hate propaganda. Give the bearded ones first class, one-way tickets to Hawaii and as many rounds of golf or scuba-diving lessons as they want. In short, set up an incentive system that rewards peace, rather than as at present, conflict.

In later tests of the Iterated Prisoner's Dilemma tests, Alexrod actually simulated this scenario by adding 'noise' to the simulation. This meant that sometimes cooperation was interpreted as defection and visa versa at some configurable rate. As expected, a naive tit-for-tat strategy quite often fell into the trap mentioned in the blog entry, with runaway mutual defection caused by a single 'misunderstanding'. Most interestingly, a new optimal strategy emerged in these simulations: A agent would follow the basic tit-for-tat strategy, but would occasionally 'forgive' a defection and cooperate. Whenever this stragegy encountered another agent following either this strategy or another naive tit-for-tat, there was an automatic saftey valve to prevent these runaway misunderstandings from happening. It turns out occasional forgiveness can be an optimal strategy.

How this can be pratically applied to the current Middle East crisis, I'm not so sure....

The Israelis and Palestinians are fighting because both believe that War is the most effective method for achieving their respective goals. The war will end when one defeats the other, or both (repeat both) decide that Peace is a more effective method.

I think Cowen does note this possibility. See FN 4 ("It might be argued that the parties are stuck in a tit-for-tat equilibrium, with alternating punishments, based on disagreement about which side was first to defect from cooperation.").

And I agree that a large part of the problem is the ambiguity about when "it began." Both sides think the other one "started it" and that therefore, revenge is justified.

The same thing applies to the U.S. vs. "terrorists."

Neither story is likely to have a happy ending. I can't imagine Israel existing in 10 years. Sometimes, I wonder if the destruction of Israel was dubya's plan all along, given that it seems many times more likely today than it did 5 years ago.

Good theory, but a poor application of it. Tit-for-tat assumes that both sides eventually want an end to conflict. But in this case, it's only Israel that wants an end to conflict; the Arabs (esp. Hamas) openly state that they want nothing from the infidel Jew -- but instead want to elimate the infidel Jew.

A) The Israelis do not see occupation as retaliation for terrorism. Instead, they see it as a physical buffer; i.e., a defense against terrorism. Would you say that pre-1967 Egypt and Jordan saw their occupation of "Palestine" as a retaliation against the Palestinians?

B) Islamic fundamentalists terrorize not out of retaliation, but instead from their stated desire to kill Jews. Listen to their leaders, Prof. Caplan -- they are quite explicit in their desire to kill Jews as the Nazis once did, and the only restraint on Arab aggression is Israel's defense.

C) Israel has the ability to wipe out the entire Palestinian population many times over, and yet they continuously offer "peace". You remember the Oslo accords? Israel offered peace and Arafat's army of terrorists attacked. The only provocation was a peace offering -- which would have put the Palestinian grievance industry out of business. Tit for tat indeed.

D) I wonder if you consider Stalin's deportations to be a "tat" for the Kulak's "tit". I wonder if you consider the Nazi "final solution" of six million exterminated Jews a "tit" for the genetically inferior Jewish "tat". I doubt you would. Consider the parallels here.

the Arabs (esp. Hamas) openly state that they want nothing from the infidel Jew -- but instead want to elimate the infidel Jew

Bill; not all 'the Arabs' surely? Don't aim for justice, and forget history. Subordinate everything to the outcome that almost everybody wants: peace. Pay off those who don't want it, or send them on a long long holiday. Give greed a chance man.

Of course, not all Arabs want to eliminate Jews. And not all Germans wanted to eliminate Jews, either. But in the context of Mideast conflicts, it's the genocidal Arabs who matter. (Otherwise, the whole point is moot and the Middle East would be a Switzerland in the desert.)

Anyway, if I wanted to do good by Allah, I would short-sell some peace bonds and then dispatch some youngsters to incinerate themselves in Tel Aviv buses.

Bill, I'm glad you see the role for financial incentives. Now, don't you think Allah's will, as interpreted by human beings, can also be malleable? The people you'd short sell the bonds to would have incentives too.

Well, Ronnie Horesh, I agree that Allah's will is malleable. The question is: What will it take to persuade people who are already forfeiting all of their future earnings (the 19 WTC hijackers were not poor people), and their relationships with friends and family, in exchange for a 100% certainty of immediate death.

The question is: What will it take to persuade people who are already forfeiting all of their future earnings ... and their relationships with friends and family, in exchange for a 100% certainty of immediate death.

Bill, I don't know it will take, but what is your proposed alternative? I write about setting up an incentive system that may not work directly on terrorists, but will work on the people who currently create and mould them. Define the outcome we want, and let the market, not the corrupt and insane leaders of the various factions, work out how to achieve it.

I have no proposed alternative. My point was to only to convey the nature of what civilization is up against: savage religious fanatacism which cannot be modeled by tit-for-tat game theory, nor converted with dollars.

Perhaps it's only human nature to form tribes for superstitious and genocidal purposes. I would like to wish it away, and I would very much like to see a scheme such as your peace bonds at least tried.

But history has shown that there is an effective method for ending barbarity, and it was demonstrated in Hiroshima and Dresden. In those cases, civilization got the last "tat".

Bill, thanks. I wouldn't be so pessimistic. Take a trip to the border between England and Scotland; very quiet these days, but for 300 years there were bloody skirmishes between the supposedly intractable factions. There are lots of examples of allegedly intractable conflicts that have ended in ways other than by one side winning a total victory. The belief that total, crushing victory is necessary is itself a block toward more peaceful alternatives.

Wrong. The Dillema refers to a totally different situation, and certainly not to a situation where both participants are convinced that the other party is decided to eliminate him. Palestinians' goal is to push Israelis out, and viceversa. Cooperation may be the rational thing to do, but not when the other party's goal is to eliminate you. European Jews cooperated with the Nazis, like Gans in Lodj and Kastner in Hungary, but that favoured only the Nazis. Palestinians are no Nazis, I know, and I hope that after Arafat, their goal is rational accommodation, so nowadays, maybe, the Dilemma may be appliable. Hope so. BTW, it was apllied innumerable times in the past, Israelis declared unilateral withdrawals, and so on, to no result.

These analyses may be factually correct, but they stir everything up, just like remembering individual hurts from long ago, which does so much for therapist's income but not much for the client. If peace is really our objective we need to go beyond history and notions of justice and create new realities. Financial incentives can do a lot. People do all sorts of unnatural and unpleasant things for cash. Give greed a chance to do its work in the Middle East.

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